Federal Report Presses Medicare for Stronger Anti-Fraud Reforms

By Jason Oliva | October 22, 2014

While Medicare fraud isn’t specific to any one sector of healthcare, it can be a blemish on industries like home health, which ultimately suffer due to a few bad actors. However, implementing several key integrity reform measures can help strengthen federal payers like Medicare from further abusive practices, according to a recent report from the Congressional Budget Office (CBO).

Home health care often catches a bad reputation for the prevalence of fraud that occurs within the sector, despite its role as a cost-effective alternative to institutionalized care. Although fraud is certainly detectable and quantifiable, instances of abuse usually surface after the acts have been committed.

This seemingly undetectable nature of healthcare fraud has created a billion-dollar problem for the government, despite its anti-fraud initiatives already in effect.

In fiscal year 2014, spending on dedicated anti-fraud activities through the Health Care Fraud and Abuse Control (HCFAC) program was approximately $1.4 billion, which CBO notes was equal to about 0.2% of the federal government’s spending for the programs’ benefits.

“Measuring fraud is not simple, in part because fraud can be determined with certainty only after the fact,” CBO wrote in the report. “Moreover, although fraud that has been successfully prosecuted can be quantified, there is no reliable method to estimate the amount of fraud that goes undetected, especially because at first glance successful fraud can look very much like appropriate payment for health care services.”

Furthering the idea that fraud is elusive and hard to detect, the Government Accountability Office (GAO) concluded that “there is currently no reliable baseline estimate of the amount of health care fraud in the United States.”

While government entities—primarily the Department of Health and Human Services (HHS), the Centers for Medicare & Medicaid Services (CMS) and the Department of Justice (DOJ)—have undertaken several initiatives to address instances of healthcare-related fraud, CBO notes that funding for anti-fraud activities is limited.

Since 2009, the HHS- and DOJ-formed Health Care Fraud Prevention and Enforcement Action Team (HEAT) has filed criminal charges and civil charges against more than 1,700 defendants who falsely billed the Medicare program for more than $5.5 billion.

In general, CBO estimates that federal spending for the programs’ benefits would be reduced by legislation that would provide either additional funding or new authority to reduce fraud.

Appropriating additional funds, making statutory changes, mandating new or additional anti-fraud activities and increasing penalties for offenders are CBO’s top proposals.

In analyzing past proposals for providing additional funding for anti-fraud activities, CBO estimated that such funding would produce savings that exceed the cost of carrying out those activities.

For such estimates, CBO compares the proposed funding against its baseline—projected spending over the next 10 years—for HCFAC spending under current law and applies to the difference a return-on-investment factor of about 1.5:1—meaning a dollar that is invested saves, on average, $1.50.

Although this new investment would yield savings, CBO stresses that the estimated savings do not “pay for” increased spending from those or other policies for the purpose of enforcing Congressional budget rules.

CBO also analyzed legislative proposals to modify practices and behaviors in programs such as Medicare, Medicaid and the Children’s Health Insurance Program (CHIP).

Specifically, CBO focuses on the scope of new requirements in proposed legislation and whether they would increase existing laws and regulations—for example, by expanding the universe of prohibited behaviors or by adding conditions for providers who wish to participate in either Medicare, Medicaid or CHIP.

In analyzing proposals to mandate new or added anti-fraud efforts, CBO considers whether the government’s current authority premisses it to undertake the activity.

“Proposals might reduce spending for health care programs if they direct resources away from less effective anti-fraud activities or if they include funding for new activities that would save more than they cost,” CBO stated. “Conversely, CBO might conclude that the newly required activity would displace other actions that are more effective at reducing fraud; if so, requiring new program integrity activities might increase, rather than decrease, federal spending.”

For offenders, CBO considers how proposed changes in penalties would affect the expected costs for individuals or businesses that commit fraud, particularly whether imposing large financial penalties might deter a significant amount of fraud.

The new CBO report highlights the need for federal health care programs like Medicare to implement integrity reforms in efforts to prevent aberrant practices, said The Partnership for Quality Home Healthcare in a written statement.

“America’s seniors deserve the highest quality, most cost effective, and most secure Medicare program available, which is only possible through program integrity reforms that specifically target fraudulent behaviors,” stated Eric Berger, president and CEO of The Partnership.

Home heath leaders such as The Partnership have sought targeted program integrity reforms. The Partnership’s Skilled Home Health and Integrity Program Savings (SHHIPS) aims to prevent aberrant payment activity by strengthening the review processes for claims billing, along with creating payment safeguards and tightening participation standards, including temporary entry limitations to prevent excess growth.

SHHIPS is based upon a policy included in the Affordable Care Act, which achieved a 70% reduction in outlier costs, from $1.2 billion in 2009 to $350 million in 2010. The program is currently on track to generate a total of $11 billion in taxpayer savings over the next decade, according to The Partnership, which notes that by capping Medicare outlier claims at 10%, the policy was effective in stemming what was considered to be unchecked fraud and abuse.

“CBO’s report underscores the importance of advancing policy solutions like SHHIPS that are proven to strengthen the delivery of healthcare to our nation’s seniors by protecting the Medicare program against fraudulent activity,” stated Berger.